Another Way to Buy Into Twitter

With no IPO likely soon, consider Firsthand Technology Value Fund

In light of the wreckage in the social media sector, such as with Zynga (NASDAQ:ZNGA), Facebook (NASDAQ:FB) and Groupon (NASDAQ:GRPN), activity in the IPO market could be slack next year. And it’s a good bet we won’t see a Twitter offering.

But for investors who still want a piece of the action, there is a way to get some exposure to the company’s shares: Take a look at Firsthand Technology Value Fund (NASDAQ:SVVC), an investment fund that purchases pre-IPO shares.

According to a post in Barron’s, Firsthand’s stake in Twitter is now at 8.3% of its total assets. Some of the other holdings include Facebook, Gilt Groupe and Solar City (which plans to come public next week).

Firsthand purchases its shares primarily in secondary markets. However, financial information on these investments is often lacking, which can lead to misfires on valuations. For example, before Facebook came public in May, the shares were fetching about $42 to $45 in secondary markets. Now they trade at $27.

Yet with the substantial sell-off in social stocks, the valuations for privately held investments may now be much cheaper. And this could explain why Firsthand has been aggressive with Twitter.

But investors need to still be extremely cautious. A fund like Firsthand should represent only a small part of your portfolio (say, less than 5%). Keep in mind that its price range for 2012 is $14.25 to $46.50. Yes, volatility is the nature of pre-IPO investing.

But for investors who want to participate — and can stomach the risk — Firsthand looks like a good choice.

Based in Silicon Valley, Tom Taulli is in the heart of IPO land. On a regular basis, he talks with many of the top tech CEOs and founders trying to find the next hot deals and finding out which start-ups are stinkers.

A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.

Tom is routinely quoted in the media about upcoming deals with his interviews on CNBC and Bloomberg TV, but he is eager to take your questions too. You can message him on Twitter at @ttaulli. And feel free to weigh in via the comments section on any of his IPO Playbook posts.